$$C_p = \frac{SS_E(p)}{\hat{\sigma}^2} - 2 + 2p $$

Here is the formula of Mallows's $C_p$ statistic, wher $SSe_p$ is residuals sum of square, $\hat\sigma^2$ is estimated variance of residuals, $n$ - number of observations and $p$ - number of predictors in model.

Questions: How can we intuitively understand and explain this statistic? Why does (from an intuitive point of view) it take such a form?

And what is the interpretation of the statistic? What does the output value mean? How can we interpret the result?

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    $\begingroup$ My understanding is that Cp's primary use is as a criterion for variable selection. SAS is one of the few software packages that recommends this statistic. Otherwise, I don't anyone who relies on it. Your question is clear but my question is, why waste time trying to understand it? Use another tool or approach for variable selection that is much clearer and more readily explained, e.g., the Lasso. $\endgroup$ – Mike Hunter Mar 24 '17 at 15:03
  • $\begingroup$ @DJohnson maybe you are right, but additional knowledge doesn't hurt:) But thank you for your comment! $\endgroup$ – Daniel Yefimov Mar 26 '17 at 13:08

Suppose we are working with a linear model $Y = X\beta + \varepsilon$ for $\varepsilon \sim \mathcal N(X\beta, \sigma^2 I)$. Then (up to a constant) the log likelihood $l$ of $\beta$ is given by $$ -2 \times l(\beta, \sigma^2 | Y) = \frac{1}{\sigma^2}|| Y - X\beta||^2. $$

Recall the definition of the AIC: $$ AIC(\hat \beta, \hat \sigma^2) = -2 l(\hat \beta, \hat \sigma^2 | y) + 2 p $$ where $p$ is the dimension of our model.

We have that $$ C_p = \frac{1}{\hat \sigma^2} ||Y - X\hat \beta||^2 + 2p - 2 $$

so we can see that the AIC and $C_p$ differ only by a constant, therefore their respective argminima are the same. As @DJohnson mentioned in the comments, $C_p$ is only ever really used for variable selection, i.e. we care about its argmin rather than its actual values. This means that (for this particular model, at least) we can interpret argminima of $C_p$ in terms of the argminima of the AIC and there's a whole body of work on that. See here or here, for instance.

In effect, I'm completely echoing DJohnson's comment that this isn't a particularly useful statistic and there's no point in wasting time trying to understand it by itself. I advocate for framing it in terms of AIC, which is definitely worth understanding (even if you don't like it or use it), and then putting your mental effort there (and on related *IC things like BIC, AICc, and etc).


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